Lawyer in partnership with Edwin M. Stanton who in 1862 joined the War Department as an assistant secretary shortly after Stanton was named secretary of war. Watson’s presence in the War Department diminished the authority fellow Assistant Secretary of War Thomas A. Scott, who subsequently left the department.

General Henry Haupt recalled that Watson “had been associated with Mr. Stanton as a lawyer, and was his most intimate friend. He was a man of bright intellect and sound sense; discreet, prudent and eminently practical, and acted as a balance-wheel in the Department.” Historian Michael Burlingame called Watson “shrewd and energetic.”1 Historian Bruce Tap described Watson as "a chunky, red-bearded Scot, who had been banished from British soil for his part in the Canadian Rebellion of 1837." Tap wrote that Watson was "acclaimed as 'probably the first patent lawyer in the United States; a business man of great industry, clear head, and sterling integrity. He was also one of Stanton's few close friends. Since Watson had learned a good deal about weapons as a patent attorney, Stanton put him in charge of the Ordnance Office," which was a perennial sources of problems."2

Historian Mark E. Neely noted that Watson "reputedly had a 'knack' for detecting frauds; he and Stanton tried to prosecute them energetically.” Watson was even willing to stand up to the president in order to pursue fraud cases.3 Journalist Carl E. Feather wrote that Watson “brought to light fraud by a forage supplier who sold to the Army a mix of Indian corn and oats as animal feed. Watson discovered that the supplier was shifting the grains ratio to favor the less expensive component and was thereby cheating the government out of tens of thousands of dollars. One account of the incident states that the supplier quickly admitted guilt and made restitution to keep the matter quiet — there were a number of high-profile persons involved in the company. While Stanton was content with that arrangement, Watson unsuccessfully pushed for criminal prosecution.”4

Two of Stanton’s assistant secretaries, Peter H. Watson and Thomas A. Scott, fell into discord in the spring of 1862. Scott resigned and returned to the Pennsylvania Central railroad. On June 29, 1862, Lincoln breakfasted with Watson at the Soldiers’ Home. On April 6, 1863, President Lincoln signed an order: “Peter H. Watson, Esq, Assistant Secretary of War is authorized to perform the duties of Secretary of War during the temporary absence of Secretary Stanton from Washington.”5

Watson had been an attorney on the McCormick Reaper trial and worked effectively to side Mr. Lincoln as a co-counsel. Watson, who was associated with the chief counsel, George Harding, was sent to Springfield to talk to Lincoln. Harding wrote: “Watson was satisfied that he was not the associate we wanted, but after some conversation, concluded that Lincoln had qualities which might be rather effective in that community, that it would be unwise to incur his hostility by turning him down after consulting him, and paid him a retained (at which he seemed much surprised), arranged for quite a substantial fee to be paid at the close of the litigation, and left him under the impression that he was to make an argument and should prepare himself for it.”6 Watson apparently advised Harding that Lincoln should not make a presentation to the jury.

Prior to Lincoln’s inauguration in 1861, then Attorney General Stanton used Watson as a conduit of information to Senator William H. Seward – and thus to President-elect Lincoln – about what the Buchanan Administration was doing.

Watson left the War Department on July 31, 1864 to enter coal mining in Pennsylvania and Ohio. Watson subsequently became president of the Erie Railroad (1872-1875).